Wednesday 15 May 2013

City Development

OCBC on 14 May 2013

1Q13 PATMI came in at S$137.7m, down 12% YoY mostly due to the absence of a disposal gain from the Tagore Avenue warehouse sale in 1Q12, partially offset by gains from strata units sales in non-core industrial assets. First quarter PATMI now makes up 20% of our full year forecast, which we judge to be in line with expectations. In 1Q13, the group launched two projects, the 912-unit D’Nest and 868-unit Bartley Ridge, of which 87% and 62% of total units have been sold – a reasonably firm set of performances. The group’s hotel subsidiary, M&C, reported a soft set of first quarter numbers, with 1Q13 PATMI down 29% YoY due to a room refurbishment program that removed over 100k room nights and more difficult sector conditions. Maintain HOLD on CDL with an unchanged fair value estimate of S$12.04 (15% RNAV disc.)

1Q13 results within expectations
City Development’s (CDL) 1Q13 PATMI came in at S$137.7m, down 12% YoY mostly due to the absence of a disposal gain from the Tagore Avenue warehouse sale in 1Q12, partially offset by gains from strata units sales in non-core industrial assets (Elite Industrial Building 1, 2 and Citimac Industrial Complex). First quarter PATMI now makes up 20% of our full year forecast, which we judge to be in line with expectations. Topline for the quarter was S$763.5m, which decreased 10% YoY mostly due to lower contributions from the property development segment and again within view (21% of FY13 forecast).

Executing well on pipeline
In 1Q13, the group launched two projects, the 912-unit D’Nest and 868-unit Bartley Ridge, of which 87% and 62% of total units have been sold – a reasonably firm set of performances. Previously launched projects continue to show good sell-through: 508-unit Echelon is 93% sold; 521-unit H2O Residences is over 93% sold; 501-unit Hedges Park is nearly sold out. In addition, HAUS@Serangoon Garden, Bartley Residences and The Palette are fully sold. Looking ahead to the remainder of FY13, CDL is looking to launch the 616-unit Jewel@Buangkok, a 380-unit EC at Sengkang and a mixed development at MacPherson/Upper Serangoon Rd (266 residential and 28 retail units). 

M&C 1Q13 PATMI down 29% YoY
M&C reported a soft set of first quarter numbers with 1Q13 PATMI down 29% YoY due to a room refurbishment program that removed over 100k room nights and more difficult sector conditions. That said, CDL still saw global RevPar increased 1.9% YoY for the quarter. London and New York were up 7.4% and 5.0%, respectively, while Singapore was down 9.3% and the rest of Asia down 10.8%.

Maintain HOLD
We continue to keep a neutral stance on the residence sector and expect the latest series of property curbs to impact demand fundamentals meaningfully. Maintain HOLD on CDL with an unchanged fair value estimate of S$12.04 (15% RNAV disc.).

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